We stopped yesterday with the idea that understanding and positioning the real estate cycle would be of great benefit.
If the government didn’t enter and the market wasn’t constantly distorted, the calculations would be much easier.
Last year, I received my first HomeBuilder grant. The intention was to boost construction. However, some builders, despite being perhaps beneficiaries, opposed it.
why? It hijacked their cash flow in the short term. This is because we stopped committing to new projects until the buyer received the grant.
It is still rattling the industry. Tamawood’s chairman yesterday pointed out that subsidies are revitalizing the market, just as labor and material supplies are restricted under COVID.
The benefits of stimulating bragging may actually be a bit less.
And of course, we now live in an economy where the government can plan iron balls whenever they need them.
For example, Western Australia put Perth in a week-long blockade …An example of COVID??
That seems insane to me. The “fly-in, fly-out” workforce creates turmoil in the mining industry because it doesn’t know if it’s coming, going, or stationary.
Who can confidently invest if the rules are subject to change weekly?
2021 has already proven to be unstable and I don’t think it will soon disappear. Yesterday was a great day at ASX.
The stock was clearly looking weak as the deal began. Many plummeted … just to reverse the market and close the green of the day.
Do you get a lot of cash from bystanders? Maybe.
This volatility is one of the reasons why we need to know if we hold short-term or long-term stocks.
The midpoint can be a war zone. People with tight stop losses can get out of many deals when the market fluctuates in this way.
Has several strains for short-term catalysts. And some are ready to go back after 2022.
The housing market boom around the corner …
The surest cycle I’m ready to retreat in the long run is the real estate cycle.
Last week there was one reason. Lending has recorded strong growth, with Australian homes up 8.6%, according to RBA data.
According to the Australian Bureau of Statistics, total new lending commitments in December totaled $ 26 billion, a record high.
The credit will continue to flow to the market, further raising the price. It’s not everywhere, of course, but it’s enough to keep shifting the total value of the home up.
Stocks that can take advantage of this cycle are worth considering. I’m not saying they are buying automatically … but at least find out how they can monetize buying pressure in the domestic market.
After all, homeowners seem to be driving the current trend. What if investors come back in a big way? Price increases begin to produce more price increases.
It is clear blindly that neither the RBA nor the government has the political strength to prevent another land frenzy that hits Australia.
Now consider all the subsidiaries that provide the entire system. Brokers, finance companies, builders, fitters and furniture companies, household goods retailers.
As the real estate cycle moves upwards, each has a brighter earnings outlook.
Yesterday I saw an important chart from the academic Dr. Cameron Murray. Australia’s housing interest payments have been the lowest compared to income since 1999. See for yourself …
Land prices are absorbing this profit and will continue to do so until it reverses.
However, it never gives a smooth ride. But I know a healthier theoretical framework that puts the land placement and the benefits of owning the land at the center of the analysis.
So much economic activity results from the purchase, rent, renewal, fragmentation, and use of land.
It drives the construction of the “Super Skinny” tower in North Sydney to a very high level of money supply in Australia through bank credit creation.
Still, how many people bother to learn the history and meaning of this? Not many.
Today’s point: As far as the “bubble” of the Australian housing market is concerned, you haven’t seen anything yet.
I pray the best wishes,
Editor, Daily Reckoning Australia
PS: Our publication, The Daily Reckoning, is a great place to start your investment journey. Let’s talk about the big trends that drive the most innovative stocks in ASX. Learn all about it here.
Australian Housing Market Outlook: Land Boom Brewery
https://www.dailyreckoning.com.au/australian-housing-market-outlook-land-boom-brews/2021/02/02/ Australian Housing Market Outlook: Land Boom Brewery